Cain & Bultman, Inc. v. Miss Sam, Inc.

• Decision Date: 27 January 1982
• Docket Number: No. 81-124,81-124
• Citation: Cain & Bultman, Inc. v. Miss Sam, Inc., 409 So.2d 114 (Fla. App. 1982)
• Parties: CAIN & BULTMAN, INC., a Florida corporation, Appellant, v. MISS SAM, INC., a Florida corporation, Thomas A. Miller and Marie J. Miller,his wife, and Florida Carpet Corporation, Appellees.
• Court: Florida District Court of Appeals

Page 114

409 So.2d 114

CAIN & BULTMAN, INC., a Florida corporation, Appellant, v.MISS SAM, INC., a Florida corporation, Thomas A. Miller and Marie J. Miller,his wife, and Florida Carpet Corporation, Appellees.

No. 81-124.

District Court of Appeal of Florida, Fifth District.

Jan. 27, 1982.

S. Gordon Blalock of Blalock, Holbrook & Akel, P. A., Jacksonville, for appellant.

Clark A. Stillwell of Tucker, Hicks, Blanchard, Brannen & Stillwell, P. A., Inverness, for appelleeMiss Sam, Inc.

No appearance for appelleesThomas A. Miller and Marie J. Miller and Florida Carpet Corp.

COWART, Judge.

This case involves: the effect of the recording statute and of a notice of lis pendens; the nature of an agreement for deed (or land contract); and the property rights of parties claiming under an agreement for deed and two mortgages relating to real property in Citrus County, Florida.

Thomas A. Miller and Marie J. Miller(the Millers), acquired land in 1972 and in 1974 mortgaged a part of it and a mobile home to Citizens First National Bank to secure an indebtedness of $20,000.This first mortgage was promptly and properly recorded.

In 1976 the Millers, as sellers, executed an "Agreement for Deed" with Frank G. Ackley and Janet B. Ackley(the Ackleys), as buyers, in which the buyers agreed to pay to the sellers various incremental sums of money and the sellers agreed that, upon payment of said sums in full, the sellers would execute and deliver to the buyers a warranty deed to certain personalty and two tracts of land, the first being a 13.54 acre tract which included the property mortgaged to the Citizens Bank.In this agreement the sellers agreed to make all payments on the first mortgage as due and to have that mortgage satisfied of record when the buyers were entitled to receive their warranty deed.This agreement provided that if the buyers defaulted in payment, the sellers had the right to "terminate this agreement," in which event the buyers agreed they would surrender possession and the sellers could retain all sums paid as liquidated damages and as reasonable rental for the use of the property.This agreement was not recorded but, claiming under it, the Ackleys took actual possession of the property.

Thereafter, the Millers filed suit against the Ackleys to foreclose the agreement for deed for default in payment and filed a notice of lis pendens on July 13, 1977.On February 13, 1978(while the Miller-Ackley foreclosure suit was pending), the Millers executed to appellantCain & Bultman, Inc., a mortgage on the 13.54 acre tract to secure a note for $50,000.This mortgage was not recorded in Citrus County until December 13, 1978.On February 7, 1979(again while the Miller-Ackley foreclosure suit was still pending), appellant filed suit against the Millers to foreclose its mortgage; this suit proceeded to final judgment and on October 10, 1979, appellant bought the 13.54 acre tract of land at the resulting clerk's sale.

In the meantime, by an instrument captioned and filed in the pending Miller-Ackley foreclosure suit, the Ackleys sold, assigned and transferred to appelleeMiss Sam, Inc., "all of their right, title and interest in and to the above captioned case."Miss Sam was then substituted as partydefendant for the Ackleys.The Millers and Miss Sam stipulated a settlement under which the Millers agreed to transfer all of their interest in the property to Miss Sam in consideration of Miss Sam releasing all claims against the Millers under the agreement for deed and all claims under the Ackleys' counterclaim for rescission and damages.The trial court in the Miller-Ackley foreclosure suit approved that settlement stipulation, ordered the Millers to perform by conveying the property to Miss Sam within twenty days and provided that upon Millers' failure to timely make such conveyance the order would act as such conveyance.¹Miss Sam then acquired the Citizens First National Bank first mortgage, and the indebtedness it secured.Next Miss Sam brought an action against the Millers and Cain & Bultman in two counts: the first count to foreclose the Citizens First National first mortgage and the second count to quiet title to the 13.54 acre tract and the second parcel described in the Miller-Ackley agreement.The trial court by summary judgment quieted the title to said property in Miss Sam, whereupon Miss Sam voluntarily dismissed the mortgage foreclosure count.Cain & Bultman filed this appeal challenging the correctness of the judgment quieting title in Miss Sam.

The questions involved are: what are the rights of the two contending parties(the appellant Cain & Bultman and the appellee Miss Sam) in and to this property, whose rights are superior and what is the effect of that superiority.

The first question is the one of priority.Normally, competing interests in land have priority in order of their creation in point of time.An interest created first has superiority over an interest created later from the same source, provided that notice of the first created rights are available to those later acquiring rights in the same land.Under our recording statute, section 695.01, Florida Statutes(1979), this notice may come from parties in possession of the property, from actual notice or from constructive notice of matters recorded in the public records.In the answer filed September 16, 1977, in the Miller-Ackley foreclosure action, the Ackleys alleged that they had vacated the property in question on or about August 1, 1977.After this date, no notice of their rights could be imputed from possession.This really does not matter in this case because, under section 48.23(2), Florida Statutes, the lis pendens filed July 13, 1977 in the Miller-Ackley foreclosure action was effectual until July 14, 1978, but not thereafter, to give constructive notice of the matters involved in that action.

This prompts Cain & Bultman to argue that it was not charged with constructive notice of the Ackleys' rights involved in the action to foreclose the agreement for deed because Cain & Bultman did not record its mortgage from the Millers in Citrus County, Florida, until December 13, 1978.The answer to this contention is that for notice to those who later acquire an interest in real property to be meaningful, such notice must be available at the time the subsequent interest is acquired.Cain & Bultman acquired its mortgage interest on February 13, 1978, which was during the one year (July 13, 1977 to July 14, 1978) that the lis pendens in the Miller-Ackley foreclosure suit was effectual to give notice of Ackley's rights under the agreement for deed.Since Cain & Bultman acquired its mortgage interest with legal (constructive) notice of the Miller-Ackley agreement for deed, its mortgage interest is inferior to the rights of the Ackleys and their successors in interest.The recording of Cain & Bultman's mortgage in Citrus County, Florida, on December 13, 1978, was effective only to give notice of its mortgage to persons acquiring an interest in the property after the recording of that mortgage (more on this later) and had nothing to do with Cain & Bultman's notice of Ackleys' contract rights.Accordingly, Cain & Bultman acquired its mortgage lien interest with at least legal constructive notice of the Citizens First National Bank recorded first mortgage and of the Miller-Ackley agreement for deed; therefore, Cain & Bultman's mortgage lien interest in its hands ² was, and is, inferior to the rights of the original holders of those instruments and of their successors in interest thereunder.

The next question is what are the rights of the parties in and to this property.The answer to this question requires a consideration of the nature of the rights involved.Originally, the Millers owned the unencumbered title in fee simple absolute-the whole title recognized in law and in equity.They first gave Citizens First National Bank a lien against their whole legal-equitable interest in part of the land in question to secure an indebtedness.The effect of this mortgage is that the Millers agreed that, if repayment of the promissory note was made, the lien of the mortgage would be cancelled but, if not, the holder of the mortgage had the right to look to the property as security and to collect the debt, if necessary, by a foreclosure proceeding in equity.In foreclosure, the unpaid amount of the debt is determined and the owner is given one last opportunity to "redeem" his property by payment of all sums due, failing which the property is sold at public sale conducted under court authority and the proceeds of the sale are applied to pay or reduce the unpaid balance on the debt, with any surplus available to those having inferior rights in the mortgaged property.

In the usual sale of land where the purchaser does not pay the purchase price in full, the seller conveys by deed the legal title (which includes the unsevered equitable title) to the purchaser, who then executes a note and mortgage back to the seller to secure the unpaid portion of the purchase price.Under this arrangement, the purchaser first acquires the whole legal and equitable title subject to losing it by foreclosure if the secured portion of the purchase price is not paid.The seller passes the legal-equitable title and acquires a purchase money mortgage lien against the property with substantially the same rights as a lender whose mortgage merely secures a loan.

Another, less common method of effecting a time payment sale of land is by an agreement for deed, sometimes called a contract for deed, an installment sales contract, a land contract and sometimes even a retained title or conditional sale contract.The Miller-Ackley Agreement for Deed is such a legal instrument.It is an executory contract for the sale of land in which the buyer agrees to pay the purchase price, usually in a series of payments over a long period of time.The buyer is usually given...